Question

multiple choice question

Q2)A business man travels to China on a regular basis and stays in the same hotel. After conversion in US dollars, the
price of the hotel room has been falling, You conclude that

a)The US dollar has appreciated against the Chinese yuan
b)The US dollar has gained value against all other currencies
c).The US dollar has depreciated against the Chinese yuan

Q3)In April 2018, the exchange rate between the US Dollar and the euro is 1 euro $121 If in the following months
Inflation in the euro zone is lower than the inflation in the US, then (other things equal) a possible exchange rate would

a)1 euro $16
b)1 euro = $1.15
c)1 euro = $1

Q4) oil can be purchased in country A at a lower price than in country B, then citizens of country B will exchange their
currency to purchase oil from country A and eventually

a)the exchange rate will adjust to equalize the price of oil amongst countries

b)oil will become even cheaper in country A

c)the currency of country B will appreciate against the currency f country A

Answer 1

Q2) option A

so need to pay less & less $ imply that value of $ is increasing, one dollar could be increasingly exchanged for more & more yuan

Yuan is deprecating against dollar

Q3) option A

Lower inflation imply that currency is appreciating.

So euro will appreciate against dollar

Earlier 1€ = 12$

Now 1€ could be exchanged for more than 12$

Q4) option A

Over time , PPP will hold, purchasing power parity, buying power of all currencies will be Equalized.

Thus exhchexc rate will adjust to equalise oil prices

Option c is false, as currency of B will depreciate , since demand for country A currency will increase.

B will wrong ,oil will become costlier in due to trading